The real estate firm Redfin reported that average rents in the United States rose 14% in the United States in 2021, reaching 1,877/month or just under $23,000/year. Thus the average renting household, with an income of about $60,000, is paying more than 35% of its before-tax income for shelter. The Housing and Urban Development Department, Urban League, League of Cities, and advocacy organizations all define this as unaffordable. Already in 2018 about a quarter of households were spending half of their income on rent, according to Harvard University’s Joint Center for Housing Studies.
As recently as November 2020 Redfin’s estimate of annual rent inflation was just 5%. The chief economist at Redfin commented, “People are realizing they don’t have as much disposable income as they might have thought they had.”
The Consumer Price Index had rent rising just 4% in 2021, however, because of its absurd “owner-equivalent rent” phantasm.
Home prices for buying new and existing homes increased by 17-18% in 2021. Again the CPI will not count this as inflation at all since homes are classified as investments, not purchases. But in real economic terms, the combination of unaffordable homes and unpayable rents exemplifies the large proportion of the cost of human labor in the U.S. economy which is actually pure economic overhead. In terms of Lyndon LaRouche’s LaRouche-Riemann model, much of what might appear to be in the category “V” – variable capital or the cost of reproduction of the labor force – is actually part of the category “d” – overhead expense and speculative waste – which lowers the real free energy of the economy. The 2007-08 “mortgage meltdown” ought to have made that clear, and it may be repeated soon.
